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interest in a trust, the trust will not be a

each person who indirectly receives the

remainder unitrusts, and pooled income

skip person even though a skip person

property interests through the entity is

funds are not considered made to skip

also has an interest in the trust.

treated as a transferee and is assigned

persons and, therefore, are not direct

to a generation as explained in the

skips even if all of the life beneficiaries

A trust will also be a skip person if

above rules. However, this look-through

are skip persons.

there are no interests in the property

rule does not apply for the purpose of

Estate tax value. Estate tax value is

transferred to the trust held by any

determining whether a transfer to a

the value shown on Schedules A

person, and future distributions or

trust is a direct skip.

through I of this Form 706.

terminations from the trust can be made

Generation assignment where

only to skip persons.

Examples. The rules above can be

intervening parent is deceased. A

illustrated by the following examples:

Non-skip person. A non-skip person

special rule may apply in the case of

is any transferee who is not a skip

1. Under the will, the decedent’s

the death of a parent of the transferee.

person.

house is transferred to the decedent’s

For terminations, distributions, and

daughter for her life with the remainder

Determining the generation of a

transfers after December 31, 1997, the

passing to her children. This transfer is

transferee. Generally, a generation is

existing rule that applied to

made to a “trust” even though there is

determined along family lines as

grandchildren of the decedent has been

no explicit trust instrument. The interest

follows:

extended to apply to other lineal

in the property transferred (the present

descendants.

1. Where the beneficiary is a lineal

right to use the house) is transferred to

descendant of a grandparent of the

If property is transferred to an

a non-skip person (the decedent’s

decedent (that is, the decedent’s

individual who is a descendant of a

daughter). Therefore, the trust is not a

cousin, niece, nephew, etc.), the

parent of the transferor, and that

skip person because there is an

number of generations between the

individual’s parent (who is a lineal

interest in the transferred property that

decedent and the beneficiary is

descendant of the parent of the

is held by a non-skip person. The

determined by subtracting the number

transferor) is deceased at the time the

transfer is not a direct skip.

of generations between the

transfer is subject to gift or estate tax,

2. The will bequeaths $100,000 to

grandparent and the decedent from the

then for purposes of generation

the decedent’s grandchild. This transfer

number of generations between the

assignment, the individual is treated as

is a direct skip that is not made in trust

grandparent and the beneficiary.

if he or she is a member of the

and should be shown on Schedule R.

2. Where the beneficiary is a lineal

generation that is one generation below

3. The will establishes a trust that is

descendant of a grandparent of a

the lower of:

required to accumulate income for 10

spouse (or former spouse) of the

•

The transferor’s generation or

years and then pay its income to the

decedent, the number of generations

•

The generation assignment of the

decedent’s grandchildren for the rest of

between the decedent and the

youngest living ancestor of the

their lives and, upon their deaths,

beneficiary is determined by subtracting

individual, who is also a descendant of

distribute the corpus to the decedent’s

the number of generations between the

the parent of the transferor.

great-grandchildren. Because the trust

grandparent and the spouse (or former

has no current beneficiaries, there are

The same rules apply to the

spouse) from the number of

no present interests in the property

generation assignment of any

generations between the grandparent

transferred to the trust. All of the

descendant of the individual.

and the beneficiary.

persons to whom the trust can make

3. A person who at any time was

This rule does not apply to a transfer

future distributions (including

married to a person described in (1) or

to an individual who is not a lineal

distributions upon the termination of

(2) above is assigned to the generation

descendant of the transferor if the

interests in property held in trust) are

of that person. A person who at any

transferor has any living lineal

skip persons (for example, the

time was married to the decedent is

descendants.

decedent’s grandchildren and

assigned to the decedent’s generation.

If any transfer of property to a trust

great-grandchildren). Therefore, the

4. A relationship by adoption or

would have been a direct skip except

trust itself is a skip person and you

half-blood is treated as a relationship

for this generation assignment rule,

should show the transfer on

by whole-blood.

then the rule also applies to transfers

Schedule R.

5. A person who is not assigned to

from the trust attributable to such

4. The will establishes a trust that is

a generation according to (1), (2), (3),

property.

to pay all of its income to the

or (4) above is assigned to a generation

decedent’s grandchildren for 10 years.

Ninety-day rule. For purposes of

based on his or her birth date, as

At the end of 10 years, the corpus is to

determining if an individual’s parent is

follows:

be distributed to the decedent’s

deceased at the time of a testamentary

a. A person who was born not more

children. All of the present interests in

transfer, an individual’s parent who dies

than 12

years after the decedent is in

this trust are held by skip persons.

no later than 90 days after a transfer

the decedent’s generation.

Therefore, the trust is a skip person

occurring by reason of the death of the

b. A person born more than 12

and you should show this transfer on

transferor is treated as having

years, but not more than 37

years,

Schedule R. You should show the

predeceased the transferor. The 90-day

after the decedent is in the first

estate tax value of all the property

rule applies to transfers occurring on or

generation younger than the decedent.

transferred to the trust even though the

after July 18, 2005. See Regulations

c. A similar rule applies for a new

trust has some ultimate beneficiaries

section 26.2651-1, for more

generation every 25 years.

who are non-skip persons.

information.

If more than one of the rules for

Charitable organizations.

Dividing Direct Skips

assigning generations applies to a

Charitable organizations and trusts

Between Schedules R and

transferee, that transferee is generally

described in sections 511(a)(2) and

assigned to the youngest of the

511(b)(2) are assigned to the

R-1

generations that would apply.

decedent’s generation. Transfers to

such organizations are therefore not

If an estate, trust, partnership,

Report all generation-skipping

subject to the GST tax.

corporation, or other entity (other than

transfers on Schedule R unless

TIP

Charitable remainder trusts.

certain charitable organizations and

the rules below specifically

trusts described in sections 511(a)(2)

Transfers to or in the form of charitable

provide that they are to be reported on

and 511(b)(2)) is a transferee, then

remainder annuity trusts, charitable

Schedule R-1.

-35-

Part Instructions

Instructions For Form 706 - United States Estate (And Generation-Skipping Transfer) Tax Return - 2011 Page 35

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